Principles for the new administration: Leave old rules with old technologies
There will be a new administration in January regardless which party wins the election, making this a good moment to recall President Reagan’s advice that “as long as we remember our first principles and believe in ourselves, the future will always be ours.”
When it comes to regulation, ensuring that the future will be ours depends on applying principles that will foster technological advancement and innovation. One such principle is that old rules should be left to the old technologies for which they are intended and not applied to new technologies.
When a technology is obsolete, we discard it. Few people are using typewriters or Blackberrys today because laptops and iPhones do much more. Like old technologies, we should leave old rules behind and not burden innovative new technologies with ill-fitting legacy regulations.
The FCC’s bipartisan approach to voice over internet protocol service (VoIP) is a good example. For years, the federal government has used law and regulation in an attempt to create local competition in the telephone industry. The Telecommunications Act of 1996 and subsequent FCC regulations and orders designed requirements that tried to create competition, particularly for the last mile. These included unbundled network elements, mandatory resale and indiscernible cost standards such as total element long run incremental cost or TELRIC. It led to countless federal and state proceedings to determine what it all meant and how it should be applied.
None of this produced the desired competition. Competition became a reality due to the advent of cellular technology in the 1980s, which has grown into a ubiquitous voice and data presence with 367 million subscribers. For voice service in homes and businesses, technology and innovation also came to the rescue to provide the competition that legislators and regulators had hoped they could create.
VoIP provided the solution. VoIP is an internet protocol technology using a broadband connection rather than the circuit-switched telephone system. Interconnected VoIP, such as Vonage and cable VoIP (e.g., Xfinity Voice), allows consumers to make calls to and receive calls from the traditional telephone network, and to and from other interconnected VoIP providers.
While consumers may use VoIP as a substitute for telephone service, VoIP is an innovative and different technology. Vonage’s service is nomadic, one that isn’t tied to the home address and can function at a different location with a broadband connection. VoIP also offers a variety of innovative features that telephone service does not, including calling via a smartphone app. It is a different technology with different capabilities.
The FCC recognized these differences, and in a series of orders applied discrete obligations to interconnected VoIP, such as 911 calling, universal service contribution, privacy and accessibility obligations. It was thoughtful about which obligations the public interest required and limited the regulatory reach. What the FCC has not done is classify VoIP as a telecommunications service and subject it to the panoply of utility-style telephone regulations. With limited exceptions, it left the old rules with the old technology.
VoIP flourished in this environment, gaining millions of subscribers at a blistering pace. FCC data shows that in June 2022, there were 68 million interconnected VoIP subscribers and 27 million end user switched access lines (telephone service). From 2019 to 2022, interconnected VoIP subscriptions increased at a compound annual growth rate of 0.7 percent. Small, but during the same period, retail switched-access lines declined at a compound annual growth rate of 12.9 percent.
The limited regulatory approach was taken by Republican and Democratic FCCs – a bipartisan consensus that VoIP is different from telephone service and should have different regulatory treatment. Of course, this year’s FCC net neutrality order applying utility-style telephone regulations to broadband is an example of the FCC failing to leave old rules with old technologies (the order is currently stayed pending review by the 6th Circuit Court of Appeals).
The FCC’s recognition that VoIP is a different technology from telephone service requiring different regulatory treatment shows that we can have bipartisan pro-innovation policies. It shows that regulators can leave the old rules behind.
It’s a principle that will make the future ours.